China has developed to become one of the most favorite destinations for many American companies. The cheap labor and large market size have been cited as the main reasons that are encouraging investors to conduct their business in China. This report identifies the information required to conduct business in China. It specifically outlines the socio-cultural, economical, legal- political, and managerial differences between the US and China.
The business environment in China is awesome, there is a large market with a robust economy that was grew by 9.7% in 2009, a year in which most countries were affected by the recession. The country has the world’s largest market with over 200 million citizens having a per capita income of more than USD 8000 ( US Commercial service, 2010). China has the second highest Foreign Direct Investment after the US.
However, China is still a developing country with major economic divisions between the urban and rural populations ( US Commercial service, 2010). The business environment is hard to predict due to lack of consistent laws and regulations. Additionally, the government does not effectively protect intellectual property rights and this adversely affects foreign companies.
Political and legal differences
There are significance differences between the political systems in China and the US. The US utilizes a federalist system in which power is shared between the federal government and the state governments that enjoy their own authorities ( US Commercial service, 2010). Additionally, local governments can have their own laws governing certain aspects such as land use.
On the other hand, the political system in China is centralized with a vertical structure of government agencies that runs from the central government to the provincial administration and finally to the local governments. This implies that lower level authorities are subordinate to the higher level and are bound by the same laws. However, the interpretation of rules is often localized and varies from one location to another due to the large size of the country.
The legal systems between China and the U.S are completely different. Unlike the US, China only began training lawyers in the 1980s. To date, there are about 100,000 lawyers, a very insignificant size for its population. The country has promulgated most laws in the last five years and many of them have not been applied, interpreted or enforced ( US Commercial service, 2010).
The judicial system lags behind the economic gains of the country. It’s a tricky affair to rely on the legal system to protect one’s business. The laws formulated seem to protect the local firms from foreign products while encouraging exports.
Socio-cultural and managerial differences
Cultural Differences have usually played a significant role in the way people conduct heir businesses. In China, the schools of philosophy have been around for many centuries and are still very much in use today for moral guidance. For instance, people there still apply Confucianism which teaches that “every person has a proper position on the society” ( US Commercial service, 2010, pp. 150).
Business behaviors are greatly affected by the Chinese culture. For instance, Chinese companies concentrate their leadership in an individual or a few people who are sometimes not in direct conduct with their juniors. Their relationships are mainly guided by the cultural teachings which emphasize on morality, correctness of social relationships, justice and sincerity ( US Commercial service, 2010).
The US has a more liberal system that relies on the stipulate rules and regulations to conduct business. Managerial practices in the U.S ensure that all members of the organization are aware of the general direction and authority is not often concentrated in a few individuals.
China’s growing influence indicates that it will continue to be a major player in the world economy ( US Commercial service, 2010). The country has a large population and great market potential making it a favorite destination for U.S companies.
US Commercial service. (2010). Doing Business in China. Washington D.C: U.S Department of State.